6. Portfolio and Asset Management

Portfolio Theory — Quiz

Test your understanding of portfolio theory with 5 practice questions.

Practice Questions

Question 1

In a two-asset portfolio, Asset A has $\sigma_A=10\%$, Asset B has $\sigma_B=15\%$, returns uncorrelated ($\rho=0$). What weight $w_A$ on Asset A minimizes portfolio variance?

Question 2

According to the CAPM, if the risk-free rate is $2\%$, the expected market return is $8\%$, and an asset has beta $1.3$, what is the asset's expected return?

Question 3

The efficient frontier in mean-variance optimization is defined as the set of portfolios that:

Question 4

For a single risky asset with $\mu=10\%$, $\sigma=20\%$, and a risk-free rate $R_f=3\%$, what weight $w^*$ in the risky asset maximizes the portfolio Sharpe ratio?

Question 5

Which of the following describes the impact of imposing a no-short–selling constraint ($w_i\ge0$) on the efficient frontier?